U.S. stocks decline for third day in a row Drop follows prediction by central bank official that economy will slow

Wall Street

January 09, 1998|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks fell for a third day yesterday, led by oil and auto companies after a central bank official predicted an economic slowdown. Citicorp led banks lower on concern that Asian market turmoil might hurt overseas profits.

"Corporate profits are in question, valuations are extreme and the economic background is shaky, particularly in Asia," said Henry G. Van der Eb, president of Mathers & Co. in Bannockburn, Ill., which oversees more than $200 million. "We're headed for the first down January in a while."

The Dow Jones industrial average fell 99.65, or 1.3 percent, to 7,802.62, its biggest drop since Dec. 23, when South Korea's benchmark stock index plunged. The 30-stock average is down 1.3 percent so far this month; the Dow last posted a loss for January in 1990, the year of its last annual decline.

So-called "cyclical" stocks such as Exxon Corp. and Ford Motor Co., whose earnings depend on a strong economy, declined. The "downdraft" from Asia's economic turmoil is likely to slow the U.S. economy even as rising labor costs undermine profit growth, said Federal Reserve Gov. Laurence Meyer. Exxon dropped $1.3125 to $59.5625 and Ford Motor Co. lost $2.0625 to $45.0625.

Maryland stocks fell, led by Lockheed Martin Corp., which fell $2.50 to $101.625, and Rwd Technologies Inc., down $2.125 to $17.25.

The Russell 2,000 index of small capitalization stocks lost 4.08 to 425.71; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq exchanges, slipped 71.99 to 9,141.11; the American Stock Exchange composite index shed 6.73 to 667.56; and the S&P 400 midcap index dipped 2.67 to 323.11.

Bank shares slumped. Tumbling currencies in Asia are expected to stunt banks' trading profits and increase the chances that businesses won't be able to pay back foreign currency-denominated loans, analysts said.

The Keefe, Bruyette & Woods Bank Index fell 17.08, or 2.3 percent, to 712.98, the third straight day that the index dropped more than 1 percent. Citicorp fell 4.375 to 117.75, Chase Manhattan dropped 4.375 to 104 and J.P. Morgan & Co. dropped 3.9375 to 108.0625.

The Morgan Stanley cyclical index of shares sensitive to swings in the economy fell 5.47, or 1.1 percent, to 471.60.

Seagate Technology Inc. fell 1.375 to 19.25 after it said it expects a "substantial" loss from operations in its fiscal second quarter, citing a steep drop in prices for computer disk drives. It was Seagate's second warning in two months.

"There's no sign of a bounce-back" to come in U.S. stocks, said Michael Lyons, a trader at Morgan Stanley, Dean Witter, Discover & Co. "The Asia markets are down, you've got Seagate coming in with lousy numbers. Nothing is pointing up."

Stocks failed to benefit from a drop in the yield on the benchmark 30-year Treasury bond to 5.75 percent from 5.79 percent. Yields fell after the government said the producer price index declined a larger-than-forecast 0.2 percent in December, reinforcing expectations for scant inflation.